Apple Could Generate the Highest Profit this Year

Source: Apple Store in Amsterdam, Netherlands/ Apple

Topeka Capital Markets’ Brian White said in a note to investors yesterday that Apple could generate the highest 2012 annual net income of any public company in the history. The analyst heard market pundits in the recent weeks, discussing the $500 billion market cap as a barrier for companies to further price upside.

Getting Past the Market Cap

Some analysts on Wall Street have theorized that the market cap is a barrier for stocks. In relation to this, they are concerned that a similar scenario could happen to Apple. The $500 billion market cap is preventing the Cupertino-based company from pushing further past the mark. As of yesterday morning, the iPhone maker’s market cap is around $545 billion.

Market analysts on Wall Street think that companies exceeding the industry barrier are having trouble growing beyond that point. Furthermore, White believes that Apple’s potential market cap is trillions of dollars instead of billions. As he pointed out:

We went and analyzed five US-based companies that at one time enjoyed market capitalizations of (about) $500 billion or more, but found little similarities with Apple.

The five US-based companies that White is talking about are Cisco Systems, Exxon-Mobile, General Electric, Intel and Microsoft. Excluding Exxon, the companies had rich price-to-earnings ratio when they cross the $500 billion market cap. These companies also had what the analyst called “monopoly-like market share positions.”

However, Apple doesn’t have a stranglehold on most market where it competes. In fact, the booming smartphone market still has plenty of room to grow. White added:

Microsoft held over 90% market share for PC operating systems at the peak cap, while Cisco had over 70% share in the networking market and Intel had over  80% of the PC processor market. By comparison, IDC estimates that Apple held just 4.7% of the PC market (in the first quarter of 2012) and 8% share in the mobile phone market.

Although the company holds 68 percent market share in the tablet industry during the first quarter of 2012, White noted that this is something that Apple invented. As of the moment, the company is trading at just 8.4 times of what the analyst estimated for next year’s earnings per share.

Nevertheless, the iPhone and iPad maker is expected to generate the highest profit than any other public trade company. White also added that the company’s net income will be six times higher than the five US-based companies when it reaches its peak.

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